Hormuz shock: India’s LPG Plan B kicks in

The government has, for the first time, fixed maximum cooking gas (LPG) production targets for individual public and private sector refineries and upstream companies. The move aims to build a domestic supply buffer after the West Asia conflict exposed India's vulnerability to disruptions in imported LPG.The Petroleum and Natural Gas Ministry, in an order issued on August 13, has specified maximum LPG production levels for 21 refineries and upstream companies. Combined production potential has been set at 63,810 tonnes a day, more than double the domestic LPG output in FY26 and about 70 per cent of the country's daily consumption. The production limits will kick in whenever there is a supply constraint.Also read: $120 crude oil scare is back & India has plenty at stakeThe largest share of the planned output has been assigned to Reliance Industries' older refinery, which will have to produce up to 18,000 tonnes a day of LPG.India's exposure during the Hormuz crisisIndia consumed 33.2 million tonnes of LPG in FY26 (about 91,000 tonnes a day). Of this, 13.1 million tonnes a year (about 35,900 tonnes a day) was produced locally, while the remaining 21.3 million tonnes a year (about 58,400 tonnes a day) was imported.This import dependence of over 64 per cent left India exposed when the Iran war effectively shut the Strait of Hormuz, the narrow sea lane through which the country sourced 90 per cent of its LPG imports from nations such as Saudi Arabia.Government's response during the crisisIn March, the government had ordered refineries to divert streams used for petrochemicals production to maximise LPG output. It also initially halted sales to industrial and commercial users before gradually scaling supplies back up. For households, the periodicity of booking refills was increased, and consumers were encouraged to shift to piped natural gas, whose supplies were less affected by the conflict.Domestic production was ramped up to about 55,000 tonnes a day at the height of the crisis. These emergency orders were gradually withdrawn once supplies eased from mid-June.How the new order differs from emergency measuresThe new order goes further than the emergency directives issued during the crisis by creating facility-wise production benchmarks. Refiners and upstream companies must also maintain adequate infrastructure for LPG storage, evacuation and transportation, and pursue technically and economically feasible upgrades to maximise output.The government has empowered itself to direct refiners, oil marketing companies and upstream producers to ramp up LPG production for specified quantities and periods, whenever it deems this necessary to ensure adequate domestic availability, equitable distribution and fair pricing.The production schedule will be reviewed every six months, allowing the government to factor in output from new refineries and upstream fields, as well as additional capacity created through technology and infrastructure upgrades. The order also asks refiners to consider measures such as converting naphtha into LPG and upgrading fluid catalytic cracking units, wherever technically and economically viable.Company-wise production targetsEighteen refineries owned by public sector oil companies have been directed to produce a combined 31,470 tonnes a day. Reliance's 33 million tonnes a year domestic-tariff-area (DTA) refinery at Jamnagar, Gujarat, whose output is sold locally has been assigned a target of 18,000 tonnes a day. No target has been set for the company's separate 35.2 million tonnes a year export-only refinery at the same site.Russia's Rosneft-backed Nayara Energy's 20 million tonnes a year Vadinar refinery has been asked to produce 4,480 tonnes a day, while upstream gas producers and processors such as ONGC and GAIL, which extract LPG from natural gas, have been given a target of 6,460 tonnes a day.Compliance requirements for companiesThe order states that all public sector, joint venture and private sector oil refining companies, along with upstream oil companies, must develop, augment and maintain adequate infrastructure, either on their own or through entities such as railways or road tankers for the storage, evacuation and transport of the specified LPG quantities.Also read: Oil steadies after US threatens to blockade Iran indefinitelyCompanies have also been directed to implement all technically and economically feasible measures including naphtha-to-LPG conversion and upgrades from gasoline-based to petro-fluid catalytic cracking units to maximise LPG production beyond current minimum levels, with intimation to the Centre for High Technology or any other authorised agency whenever such upgrades are undertaken.The ministry further said that if the Central Government considers it necessary in public interest to ensure adequate availability, equitable distribution and fair pricing of domestic LPG, it may directly or through the Centre for High Technology or another authorised agency direct oil refining, oil marketing and upstream companies to ramp up LPG production for a specified quantity and period, including compliance with restrictions on alternative uses of the input streams required to produce LPG.Companies will be required to scale up LPG production within the stipulated time frame whenever such directions are issued.Schedule to be updated twice a yearThe order states that the Central Government will update the production schedule on January 1 and July 1 every year. This will include LPG production from new refineries and upstream companies, as well as additional quantities from existing facilities arising from changes to infrastructure, production technology, evacuation, supply, transport or distribution of LPG.(With inputs from PTI)